DHFL promoters may sell half their stake; Wadhawan could give up MD post

The promoters have also roped in PE firm Oaktree, which is undertaking due diligence to consider taking over part of DHFL's wholesale loan portfolio of Rs 10,000-12,000 crore

The promoters of Dewan Housing Finance Corporation (DHFL) are willing to share control of the embattled company by selling half their stake to a "strategic investor". Kapil Wadhawan, who represents the promoters in the board, is also open to stepping down as managing director (MD) and keeping only the chairman’s position so that the company can be run jointly with the new partner. Currently, the Wadhawan family controls the housing finance firm with a 39.21 per cent holding. 

According to sources close to the deal, private equity (PE) firms Lone Star, KKR, and AION Capital (a joint venture between Apollo Global Management and ICICI Venture) are in the final stages of their due diligence, after which they will take a decision on the deal.  

The promoters have also roped in PE firm Oaktree, which is undertaking due diligence to consider taking over part of DHFL's wholesale loan portfolio (loans given to real estate companies) of Rs 10,000-12,000 crore. 

“We have all options open — to sell part of the wholesale loan portfolio or sell a stake in the main company or, of course, do both. The plan is to close some deal in the next one month,” a top source said.

The source pointed out that Wadhawan, with his expertise in the business, was looking at running DHFL with a partner to enhance its value. He is also open to offering the MD's position to provide comfort to the strategic investor and enhance corporate governance.   
 

A DHFL spokesperson declined to comment on the issue. AION, Lone Star, and Oaktree also did not comment.

In their discussions with PE firms, the promoters have envisaged to make DHFL a board-run company under a joint control. Sources said the company would again have to pay back around Rs 1,400 crore of loans by August. It is learnt that PE firm Barings was initially interested in DHFL for its retail loan portfolio, which would have meant demerging the business and made the deal too complex. Barings did not respond to queries. DHFL has a retail loan portfolio of Rs 86,000 crore while the wholesale loan portfolio is around Rs 30,000 crore.

DHFL has recently been at the centre of a storm after it announced that it was delaying interest payments on its non-convertible debentures and asked for a “cure period” of seven days to make the payments, raising fears that it might default. With the news, mutual funds holding the company’s debt funds saw their net asset value fall dramatically. Credit rating agencies got into the picture, categorising the firm’s instruments as “default”. More than 160 mutual funds hold DHFL’s debt papers. However, the company was able to pay the entire interest amount of Rs 961 crore to its debenture holders within the stipulated deadline.